The Personal Economic Process
1. The budgeting process consists of figuring out how much needs to be alloted from one's monthly income to various expenses. How much is alloted is a function of what kind of lifestyle one aspires to acheive, as well as ones monthly income. An example of a monthly budget is as follows: $400 for groceries, $200 for dinining out, $100 for mortgage or rent, $300 for utilitites, $200 for house mainenance, $300 for a car payment, $250 for gas and oil, $50 for car maintenance, $150 for car insurance, $150 for new clothing, $100 for work and leisure clothing, $250 for medical insurance, $50 for medicine, $100 for dental and eye care, $100 for personal allowance, $800 for day care, $100 for enertaintment, $200 for vactions and recreation, $50 for book clubs and magazines, $2500 for taxes of all sorts, $50 for life inusurance, $200 for gifts and charities, $100 for toilletries, $50 in dues, and finally $50 for various other expenses. All of this adds up to a total of $10,290 per month. In order to "trim some fat" off of such a budget, I would cut down on personal entertainment costs. If needed, all of the debts could be consolodated, and if there are extra uneccesary vehicles, I would sell those too. Anything that could be refina
Emergency savings are a must, and the reason for this is that if one becomes sick or injured and can't work for an extended period of time, they need to have enough saved up to live off of until disabilitiy insurance activates and starts sending checks. The liability category consists of bodily injury and property damage protection, which means if the owner of the policy injurues someone or their property while driving this coverers his or her court costs. After the stop loss amount the insurance company pays for everything, up to the lifetime maximum which is generally around $1,000,000 to $2,000,000. Next there are bonds, which come in 3 varieties: municipal, corporate, and treasury. Life insurance is yet another type of coverage that is needed. If someone dies, a face value is given to the beneficiary. Callable bonds are bonds that the company or group that you are loaning the money can pay you for at any time they want, and are undesirable (one wants a non-callable bond in other words). Fixed investments don't generally appreciate in value enough to beat inflation, and so gain around 3% annually. The result is that large sums of money must be dealt out, sometimes from undesirable places such as retirement funds, and in even worse cases not enough money can be found to pay for an accident's expenses. Municipal bonds are loans to states and cities, and can be either high risk or low risk. Mutual funds can be either load or no-load, load being that one is charged to invest in them, no-load being that one isn't charged. The next 20% would be safely put into CD's and treasury bonds, and the final 20% would be in a savings account for quick access in case of an emergency. The next type of insurance is disability, and it pays in the event that whoever is part of the plan can't work due to injory or sickness. The difference is that they are investments in several to hundreds of companies, and the decisions on which companies to buy stock from are made by a mutual fund's manager.
Common topics in this essay:
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Federal Government,
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mutual funds,
life insurance,
3 6,
low risk,
type insurance,
cash value,
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actually paid bond,
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collision coverage,
stop loss amount,
contingent beneficiary,
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